LAFAYETTE, Louisiana – Stone Energy has announced steps toward filing for Chapter 11 bankruptcy protection by Dec. 9, according to a report in The Daily Advertiser in Lafayette.
Spokeswoman Jennifer E. Mercer said that Stone, burdened with more than a billion in debt during a lingering downturn in energy prices, will sell its holdings in Appalachia for $350 million and has made agreements with senior bondholders, creditors and others to restructure its operations.
“The company will continue to work,” Mercer said. “Stone is open for business and operating. People are showing up and working and getting paid; customers are being served. This will have no impact on day-to-day business.”
Mercer said the company and other parties involved have developed a pre-packaged reorganization plan, which should help Stone navigate Chapter 11 proceedings and “come out on the other side,” perhaps as early as mid-2017. The agreement would relieve the company of some $850 million in debt and reduce its annual interest payments by $46 million.
She was uncertain where Stone would file for Chapter 11 protection.
“The execution of the RSA is the culmination of months of hard work to right-size our balance sheet in response to a sustained period of low oil and natural gas commodity prices,” Dave Welch, Stone’s chairman, president and CEO said in an issued statement. “The agreement with our note holders will provide value to all of our stockholders, improves our liquidity and better positions us to be profitable during a historically difficult time in our industry. Importantly, this agreement will allow all stakeholders to share in potential valuation growth if commodity prices improve.”
University of Louisiana at Lafayette economist Cary Heath said filing for bankruptcy under Chapter 11 protects a company from its creditors. “It doesn’t mean they are ruined,” he said. "It just protects them while they go through restructuring.”
Stone is an independent oil and gas exploration and production company. Though headquartered in Lafayette, it has additional offices in New Orleans, Houston and Morgantown, West Virginia.
The company’s strategy has been to grow oil reserves in deepwater Gulf of Mexico and onshore oil; grow gas reserves in Appalachia and the Gulf of Mexico basin; and maintain stable Gulf of Mexico shelf oil production.
Speaking to the quarterly meeting of the Louisiana Oil & Gas Association in September, Welch said the energy industry would see relief when prices reach $60-$80/bbl, although he said it was uncertain when that would happen.
Essentially, Mercer said, Stone is earning money but has more debt than it can meet, given low, unforeseen commodity prices. Sale of the Appalachia properties should be completed by February.